Before
Thompson and Kayatta, Circuit Judges, and Barbadoro,
[*]
District Judge.

BARBADORO, DISTRICT JUDGE.

Southcoast
Hospitals Group, Inc. was created through a merger of three
hospitals. One of the hospitals has a union workforce, and
the union's collective-bargaining agreement grants its
members a hiring preference when filling union positions. In
an effort to produce more even-handed hiring practices across
its three hospitals, Southcoast adopted a policy that grants
nonunion employees a similar hiring preference for nonunion
positions. The union challenged the nonunion hiring policy,
contending that it discriminates against union members in
violation of section 8(a)(3) and (1) of the National Labor
Relations Act ("NLRA"), 29 U.S.C. § 158(a)(3),
(1). A divided three-member panel of the National Labor
Relations Board ("Board") determined that the
policy was invalid because it was not supported by a
legitimate and substantial business justification. We vacate
the Board's order and remand the case for further
proceedings consistent with this opinion.

I.
BACKGROUND

A.
Southcoast's Hiring Policies

Southcoast
was created through a 1996 merger of St. Luke's Hospital,
Charlton Hospital, and Tobey Hospital. Only employees at
Tobey are represented by a union. The union, 1199 Service
Employees International Union United Health Care Workers East
("1199 SEIU"), represents approximately 215
technical, clerical, service, and maintenance employees out
of a total of 550 employees at Tobey.[1] St. Luke's has
approximately 2, 700 nonunion employees, and Charlton has
approximately 2, 100 nonunion employees.

Union
members have enjoyed a hiring preference when applying for
union jobs at Tobey since at least the time of the merger.
The union's 2011 collective-bargaining agreement, which
was in effect during the relevant time period, provides in
section 8.2 that "[v]acancies in bargaining unit
positions [i.e., union positions] . . . shall be filled on
the basis of available qualified applicants. Among such
qualified applicants, the most senior qualified applicant
shall be selected." Section 8.1 defines seniority in
terms of time spent in union positions. When these provisions
are read together, they bar Southcoast from considering any
nonunion applicant for a union position unless all union
applicants are unqualified for the position.

Southcoast
developed its current policy for filling vacancies in
nonunion positions in 1999. That policy - HR 4.06 - divides
applicants into two broad categories. "Internal
Applicants" include all nonunion, regular-status
employees, all temporary and per diem employees, and union
members who belong to a union that "provides reciprocal
opportunity to employees who are not members of the union for
open positions at the unionized site." All other
applicants are treated as "External Applicants."
Among Internal Applicants, HR 4.06 provides that
regular-status employees "will be given first
consideration for job postings providing the regular status
employee's qualifications substantially equal the
qualifications of external candidates." Temporary and
per diem applicants are considered after regular-status
employees but before External Applicants. The policy bars
Southcoast from recruiting or considering any External
Applicant for a nonunion position until all qualified
Internal Applicants have been interviewed. Because the
union's collective-bargaining agreement includes a hiring
preference for union members, they are treated as External
Applicants under HR 4.06.

Southcoast's
actual practice when filling vacancies in nonunion positions
differs somewhat from the process specified in HR 4.06. Job
openings are posted and advertised for all applicants at the
same time. Applications are screened and qualified applicants
are placed into one of three groups by the company's
human resources department. Nonunion, regular-status
applicants are considered in the first round. If no one is
selected from the first round, union applicants are
considered together with temporary and per diem applicants in
the second round. All other applicants are considered in the
third round if no one is selected from the first two rounds.

David
DeJesus, a human resources official at Southcoast, was
responsible for creating HR 4.06. DeJesus claims that he had
received complaints from unnamed employees about union hiring
preferences both while working at Southcoast and in a prior
job at another company where union members enjoyed a similar
preference. He asserts that the company adopted HR 4.06 as a
"matter of equity." From his perspective, if the
union excludes nonunion employees from the first round of
consideration for union positions at Tobey, then "it
should work the same way in the other direction."

B.
Enforcement of HR 4.06

Christopher
Souza, a union worker employed at Tobey, applied for a
building superintendent position at St. Luke's in May
2011. The following month, human resources coordinator
Lucilia Darosa notified Souza that Southcoast had chosen
another applicant. When Souza inquired as to why he had not
been selected for an interview, Darosa provided a citation to
HR 4.06 and explained that "[Southcoast] would not be
able to consider you for the first round interviews as you
currently work at Tobey in a [bargaining-unit]
...

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